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Crealta Spins Struggling Arthritis Drug Into $510M Horizon Payday

In two years, Crealta Pharmaceuticals turned a floundering treatment for a rare type of arthritis into an enticing asset. Now, it’s cashing out, to the tune of $510 million in cash.

Crealta is being acquired by Dublin-based Horizon Pharma (NASDAQ: HZNP), which wants access to pegloticase (Krystexxa). It’s the only FDA-approved drug for treating chronic refractory gout, an orphan disease that affects an estimated 50,000 people in the U.S.

Crealta, which has offices in Glendale, WI, and Lake Forest, IL, was formed in August 2013 by private equity firm GTCR. The company buys specialty pharma companies that have products that are already on the market or close to it. Crealta has used this approach to acquire two products: pegloticase and ergotamine tartrate (Migergot), a migraine treatment administered rectally.

Crealta scooped up pegloticase when it bought Bridgewater, NJ-based Savient Pharmaceuticals at a bankruptcy auction in late 2013. The filing and subsequent sale was a disappointing end for Savient, which won FDA approval for pegloticase in 2010 but ultimately went bankrupt when it couldn’t turn the drug into a commercial success.

Savient severely miscalculated the market for the drug, leading it to mark up the price several times to try to make ends meet. At the time of the bankruptcy auction, the injectable drug was selling for $5,390 per vial, or more than $30,000 for the then-estimated three-month treatment regimen. Yet Savient was bleeding cash; it sold about $34 million worth of the drug between its launch and June 2013, a fraction of the amount it spent on marketing costs alone. Savient filed for bankruptcy in October of that year, and Crealta paid $120.4 million to acquire the company and its assets a few months later.

Fast-forward two years, and Crealta has sold those same assets for $510 million. Despite pegloticase’s past troubles, Horizon—which develops and acquires medicines, particularly those for treating rare diseases—saw enough promise to bet on the drug’s future.

So, what’s been the difference for pegloticase under Crealta’s ownership? At least partly, a higher price. Horizon spokesman Geoff Curtis said in an e-mail message that the drug currently sells for about $14,000 per vial, which is more than double the per-vial price at the time of Savient’s 2013 sale.

Drug pricing is in the crosshairs of politicians in Washington, and some in the pharma industry have been criticized for buying already-approved drugs and raising their prices significantly.

Yet under Horizon, pegloticase’s price will remain largely unchanged, at least for now. “Volume is going to be the growth driver for us, and we do not have significant price increases planned,” Curtis said in the e-mail.

Curtis declined to share Crealta revenue figures, but said Horizon expects the acquisition to increase its net sales by more than $70 million in the first year after the transaction closes.